ENG-2019 — Page 88

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The Economy

supply of fresh pork since May. Netting out the effects of the government's one-off relief measures, underlying consumer price inflation climbed from 2.6 per cent in 2018 to 3.0 per cent in 2019. Headline consumer price inflation likewise went up from 2.4 per cent in 2018 to 2.9 per cent in 2019. Despite a downward adjustment in the quarterly ceiling of the government's rates concession in April 2019, the headline rate remained lower than the underlying rate for the year as a whole, thanks to the government's Electricity Charges Relief Scheme, which took effect in January 2019. Quarterly figures, though sometimes distorted by temporary factors, showed that underlying inflation picked up from 2.7 per cent in the first quarter to 2.9 per cent in the second quarter, then jumped to 3.3 per cent in the third quarter amid the surging pork prices before easing back to 3.0 per cent in the fourth quarter alongside the economic downturn (chart 13).

Chart 13

Per cent

6

5

Main Inflation Indicators (year-on-year rate of change)

4

GDP deflator

3

2

1

Underlying composite CPI

T

Q1

Q2 Q3 Q4 Q1

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2015 1

2016

1

2017

Q2 Q3 Q4 Q1 Q2 Q3 Q4

2018

2019

Underlying consumer price inflation went up in 2019, primarily due to a surge in pork prices.

Domestically, among the underlying consumer price index components, the increase in private housing rentals stayed on an easing trend in 2019. As to cost pressures, labour wages and earnings continued to rise but at a somewhat moderated pace in the latter part of the year, while pressures on commercial rent abated amid the economic downturn. External price pressures receded through 2019, thanks to a moderation in inflation rates in many of Hong Kong's major import sources and generally soft international commodity and energy prices amid the global economic slowdown. The strengthening of the Hong Kong dollar along with the US dollar against other major currencies during the year also contributed to the lower imported inflation.

The increase in GDP deflator moderated from 3.7 per cent in 2018 to 2.4 per cent in 2019. The terms of trade deteriorated slightly, as export prices rose somewhat slower than import prices.

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